Albany misses out on $90,000 in tax error

9 properties determined ineligible for 485-a exemption

Some properties initially targeted in a review of city of Albany tax credits were verified as
eligible in a recent report, including 17 Chapel St.– a condominium complex
completed by Rosenblum Development Corp. The firm determined
the storage units and parking spots available for rent to the public met
the need for a commercial business element.
(Amanda Fries / Times Union)

Some properties initially targeted in a review of city of Albany tax credits were verified as
eligible in a recent report, including 17 Chapel St.– a condominium complex
completed by Rosenblum Development Corp. The firm determined
the storage units and parking spots available for rent to the public met
the need for a commercial business element.
(Amanda Fries / Times Union)

ALBANY - The city has missed out on nearly $90,000 in tax revenue for 2016 alone due to the city assessor granting improper tax breaks to some properties, a report completed by a local firm concluded Wednesday.

Of the 27 properties examined to determine whether tax exemptions given by former Albany Assessor Keith McDonald were warranted, nine properties did not have a mixed-use element required to receive the break, the Hodgson Russ report shows.

The exemptions were given as far back as 2011, which means more has been lost over the years due to the error.

Thirteen other properties receiving the exemption didn’t have an application on file, but would be eligible for the so-called 485-a break in the state’s real property tax law, which allows for a special tax exemption for certain commercial properties such as warehouses that are converted to mixed-use buildings with both commercial and residential areas.

Those given the break are wholly exempt for the first eight years, then 80 percent for the ninth year, decreasing by 20 percent each year, for 12 total years of exemptions.

Only five of the total properties receiving the exemption have the proper documentation and specific uses needed to be eligible.

Those facing the loss of the exemption, like developer Patrick Chiou, are left unsure of what to do next.

“It’s a huge, huge" error, Chiou said. “A lot of these projects wouldn’t have gotten off the ground if these tax incentives weren’t there.”

His property at 83-87 Beaver St., which was renovated into apartments and began receiving the break in 2014, was marked as without a commercial business element, making it ineligible for the incentive.

In recent years, Chiou has taken vacant and abandoned property and converted it into residential units and other uses, applauded by building preservationists. Most notably, Chiou purchased historic 275 N. Pearl St. last year, a 166-year-old Arbor Hill church that was slated for demolition, with the possibility of turning it into a restaurant or community center.

A project that Chiou secured $1.53 million for in financing, to rehabilitate 800-804 Broadway into apartments in February, now may be in jeopardy.

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“I have letters stating that I was eligible,” he said of the Arbor Hill project. “That wouldn’t have been feasible if that exemption wasn’t given. It’s definitely a big issue.”

McDonald in June admitted to an Albany Business Review reporter he made a mistake in giving out generous tax reductions on condominium and apartment complexes throughout the city. He retired from his post shortly after the years-long practice came to light.

In mid-July, Albany law firm Hodgson Russ was selected Mayor Kathy Sheehan's office to investigate. The report's release comes a week after the Democratic primary.

Chiou said he doesn’t think McDonald's action was intentional, but he hopes the city will be able to address his concerns, adding he plans on meeting with officials before the Monday meeting of the city Board of Assessment Review. The board is meeting to correct the 2017 tax rolls.

City officials wouldn’t say whether they’d pursue recovering tax revenue lost due to the improper exemptions.

The report says the city would be limited on how many years it could recoup money from, and even then, Albany lacks standing due to the small number of properties receiving the exemption in error.

The Common Council in 2003 approved using the 485-a tax abatement for development, and city officials say the first known exemption was granted in 2010.

Some of the properties that were initially targeted in the investigation were verified as eligible in the report, including 17 Chapel St.– a condominium complex completed by Rosenblum Development Corp. in 2013. The firm determined the storage units and parking spots available for rent to the public met the need for a commercial business element.

This site became the backdrop for Albany Councilman Frank Commisso Jr. criticizing Sheehan's administration for the lack of oversight during his mayoral campaign, suggesting she, or the city treasurer, should have been reviewing the breaks given.

Commisso later took issue with the report being released after the primary, but declined to comment further, saying he would be releasing his own statement on the report later.

The city charter doesn't outline oversight of the assessor as one of the treasurer's duties, and the New York State Assessors' Association says the local assessor has the responsibility of determining qualifications for the exemption.

One of Commisso’s supporters, Anthony Catalano, is one of the 13 property owners receiving the exemption without an application on file, according to the report.

The building at 229 Quail St. is mixed use, with Hudson River Coffee House occupying the first floor and apartments above, and acting Assessor Trey Kingston said Catalano and other property owners could submit an application for next year to receive the exemption.

Catalano did not respond to a request for comment.

Kingston said some property owners have provided documentation, whether an application or a letter from McDonald confirming the property’s eligibility.

“We asked property owners that refute our findings, please provide it to us,” Kingston said. “They can provide documentation up to the night of the (assessment board) meeting.”